Research Reports

TCOM will report 4Q19 results on March 18th after the markets close followed by an 8pm EST conference call. Based on our data and calculations, we expect TCOM’s 4Q19 net revenue to be better than consensus at RMB8,258M (9.23% Y/Y growth). However, the outlook for 1Q20 is pessimistic as the outbreak of COVID-19 hurts the traveling and lodging industries deeply. Most of the travel activities throughout China, both domestic and international, have been halted. At this point, it is hard to assess the impact from the outbreak; therefore, we are suspending our price target and rating until we obtain more clarifications.  ……

BILI will report 4Q19 results on March 17th after the markets close followed by a 9pm EST conference call. We are positive into BILI’s 4Q19 performance and 1Q20 outlook. During the coronavirus outbreak in China, the participation and interaction levels of BILI’s UGC videos increased significantly. Its games and live broadcasting are also performing well. Based on our data and model, we believe the company’s revenue is likely to be higher than consensus at RMB1,974M, and higher than the high end of its guidance range of RMB1,930M – RMB1,980M.……

PDD will report 4Q19 results on March 11th before the markets open with a 7:30am EST conference call. Based on our data and model, PDD’s total revenue in 4Q19 is likely to be above consensus at RMB10,920M (93.1% Y/Y growth) with a take rate assumption of 3.01%, unchanged from 3Q19, and 3.11% in 2Q19. We estimate that sales & marketing in 4Q19 is likely to be in the range of RMB8.8B to RMB9.1B with brand advertising relatively flat Q/Q, performance based at 35% - 37% Q/Q growth and subsidizations at 28% - 32% Q/Q growth. Impacted by an earlier CNY, GMV in January 2020 is likely to grow 23% Y/Y, and the coronavirus outbreak will impact PDD’s February sales the most. ……

YY will report 4Q19 results on March 16th after the markets close followed by a 9pm EST conference call. Based on our data and model, we believe YY’s 4Q19 revenue is likely to be higher than the company’s guidance range of RMB7,320M – RMB7,520M. For 1Q20, while YY Live was impacted a bit by the government policy, the other parts of business including Huya (game live broadcasting) and BIGO (YY’s overseas arm) are doing well. ……

The outbreak of the coronavirus does not have much of an impact on TME, but the government’s policy issued at the end of January 2020 impacts TME’s social entertainment services. The policy prohibits the lucky-draw function in live broadcastings. However, comparing with TME’s business initiatives in January 2020, we believe more positives are likely to happen throughout 2020. In January, TME’s initiated intensive cooperation and partnership activities with leading traffic vendors including TikTok / ByteDance, Kwai and Bilibili (BILI, $26.88, Not Rated), to distribute and promote musicians/music. ……

IQ will report 4Q19 results on February 27th after the markets close followed by a 7pm EST conference call. The company’s advertising business is likely to be down significantly in 1Q20 due to the outbreak; however, its online video business is positive as IQ has started to adopt a new business model of pay-per-view (PPV) since November 2019, which is positive to its online video monetization. Consensus 1Q20 revenue at RMB7,303M needs to come down as it includes unadjusted advertising revenue projections. ……

The outlook for ZTO’s 1Q20 is not optimistic. The coronavirus outbreak is causing significant pressure on the express delivery market. Many branches have delayed their openings or not resumed its full capacity due to the lack of workers as controlled public transportation and ongoing self-confinement prevent workers from returning to work. A survey published on Feb. 5, 2020 showed that only 50% of the express delivery workforce has returned to work. The sector is likely to return to normal when the outbreak subsides. ……

Just when the market was excited about the potential recovery in China’s economy in 2020 at the beginning of the year, the coronavirus outbreak hit China and manufacturers were negatively impacted. Car sales were down in January and are likely to be worse in February, March and into 2Q20. Several OEMs released their depressing January sales data. Even though we expect ATHM’s 4Q19 revenue to be in line with consensus and margins are likely to be better as the company’s spending may be lower than it indicated on the 3Q19 earnings call, ATHM as a services provider for auto OEM and dealers cannot avoid the impact to its business from the outbreak in 1Q20. ……

While China is experiencing an outbreak of the coronavirus, which is going to have significant impact on China’s economy, we are positive on NTES’s business outlook. One thing that came out of the outbreak is that the internet has become a mainstream channel for many businesses, including online education and remote telecommuting. For NTES, its online games and online education are benefiting from the nationwide self-confinement and delayed school opening schedules. We are positive on NTES’s 4Q performance. ……

Theoretically, BABA is supposed to benefit from the recent coronavirus outbreak as many offline stores are delaying their openings; however, the delivery forces are not yet running in full gear due to the nationwide caution on the virus. Therefore, FY4Q20 is likely to be negatively impacted. Once people resume their work, we believe BABA is likely to become one of the preferred platforms for consumers to shop without leaving their homes. BABA will report FY3Q20 results on February 13th before the markets open with a 7:30am EST conference call.……

EDU will report FY2Q20 results on January 20th before the markets open with an 8am EST conference call. We are positive on EDU into FY2Q20 earnings. During the quarter, the growth of K-12 course offerings was strong. Based on our data and calculation, we believe EDU’s revenue in FY2Q20 is likely to be higher than consensus at $771.8M (29.3% Y/Y growth), driven by the higher growth of K-12 attendees. ……

We are neutral into HUYA’s 4Q19E performance and cautious for its outlook in 2020. After a period of rapid growth of its users and revenue, HUYA’s operational metrics showed some levels of slower growth. In addition, Bilibili (BILI, $22.87, Not Rated) and Kwai (private) have already started to and will continue to invest heavily in game broadcasting. These two vendors are strong in terms of their user bases. At this point, we are unsure of HUYA’s strategies, particularly its S&M plans for 2020.……

TAL will report FY3Q20 results on January 21st before the markets open with an 8am EST conference call. We are positive on TAL’s performance in FY3Q20. Based on our data and calculations, we believe that TAL’s revenue in FY3Q20E is likely to be higher than consensus at $837M driven by capacity expansion in both online and offline. Peiyou’s fully registered attendee capacity grew at a faster pace of 49.6% Y/Y as the company was aggressively adopting online and dual-teacher models, and accelerating its offline expansion in FY3Q20E. We maintain our BUY rating and raise our PT to $60.00.……

We are positive on BABA into FY3Q20E performance. Even though BABA is a big company, it is quite nimble to new trends in the market as the company launched and campaigned many initiatives in the recent past, including Juhuasuan (recommendation engine), “10 billion subsidization” (customer acquisition and retention), KOL live broadcasting (traffic and traffic conversion) as well as SKU feeds, etc.……

We are positive on LK’s 4Q19E operations. Based on our data, preliminarily, LK’s store counts are likely to reach approximately 4,946 stores by the end of 2019, which include ~400 partnership or franchised stores. High growth of the number of stores is driving topline growth. At the same time, the user frequency showed improvements and discounts were less than before; and partnership stores started to make small contributions to revenue. We believe the total net revenue is likely to be higher than consensus at RMB2,170.3M ($310.1M) based on exchange rate of RMB6.9985 = USD 1. The level of discounts is not as aggressive as before.……

The food delivery market in China showed slower growth in November mainly due to the weaker economy. The early Chinese New Year in January is likely to add more pressure to this sector. Between Meituan and Ele.me, we believe Ele.me performed better in November 2019 as it received traffic support from Alipay and benefited from “11.11” sales event. Therefore, Meituan’s market share in both orders and GTV were slightly down in November compared with that in October. ……

While TME is a monopoly in China’s online music area, the company only monopolizes one of the verticals under a vast entertainment umbrella. Competition from the market is not from a vendor doing the same thing, but rather from vendors that are doing different things. In the case of live broadcasting, while TME as a newcomer put pressure on YY.com (YY, $56.70, Buy) in 2016 and 2017, presently, newcomers Kwai and ByteDance are presenting pressure on existing companies including TME and several other broadcasting vendors. ……

We are positive into BILI’s 4Q19 performance as all three lines of its business showed better or strong performance. As such, based on our data and model, we believe the company’s revenue is likely to be higher than consensus at RMB1,957M and our model, as well as better than the high-end of its guidance range of RMB1,930M – RMB1,980M.……